ANZ reports $1.65bn profit in ‘tough’ conditions

ANZ has reported a net profit of $1.65 billion for the three months to 31 December 2014 and an annual dividend yield of 4.98 per cent.

In its recent trading update, ANZ warned that 2015 will prove a “slightly tougher, more volatile” environment, as higher expenses and lower trading income impede revenue growth.

“We have seen some tailwinds associated with the lower Australian dollar in the first quarter however these have been partially offset as a result of global economic conditions including lower commodity prices,” said ANZ executive officer Mike Smith.

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Mr Smith said Australia is now in a “lower growth environment globally” which has translated into average results for listed companies.

Namely, group net interest margins declined six basis points compared with the end of the second half of 2014.

Total markets revenues – $555 million in the first quarter of 2015 – were down on the quarterly average for last year, reflecting lower trading income.

“In international and institutional banking the effect of the macro environment has been more apparent including the impact of central bank monetary policy on margins.

“Market conditions have created a challenging environment for the global markets business although we expect this to improve throughout the year,” Mr Smith said.

However, both Australian retail and commercial businesses have delivered strong performances, with further gains in home lending and growth in small business lending.

“Monetary policy is continuing to support a stable outlook for credit quality across all our businesses,” Mr Smith said.

The business settings remain conservative with the value at risk tracking below 2014 levels.

Profit before provisions grew 5.2 per cent versus the prior comparable period and rose 3.6 per cent on a constant foreign exchange basis.

Despite the slowdown in the Australian economy, Mr Smith maintained that the bank is “performing broadly in line with our expectations”.

The recent ANZ results may have been labelled “boring”, but “boring is good”, said Mr Smith.